The Trump Economy

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The goal for this piece is to be comprehensive about the effects of Trump policies on the economy. That sounds rather ordinary, but in fact most discussions of the Trump economy has been myopic to the point of misrepresentation.  There are several reasons for that:

  1. To understand the effect of Trump’s policies you need to untangle Trump’s results from the inherited economy. People tend to shy away from that, but there is actually no alternative—otherwise there is no way to say where we are going from here.  As we’ve noted before, Trump has pulled a fast one on the American public.  It’s not just a matter of claiming responsibility for successes of an inherited economy.  It’s that he is substituting wildly dangerous policies for the ones that actually got us here.  When we last discussed that subject we could only talk theoretically, but now there is considerably more to say.
  2. The usual statistics (even the unemployment rate) tell you more about the business view of the world than about what it means for people. The difference between the two says a lot about the real significance of Trump policies.
  3. Finally, most discussions of Trump’s policies focus on results from the hugely expensive tax cuts that were done last December. However, it is at least as important to understand what we have NOT DONE because of Trump’s economic priorities.  As we’ll see those sins of omission are a serious part of the picture.

The discussion plays out as a series of charts.

 

  1. Effects of Trump’s policies on the economy

We begin by teasing out the effects of Trump’s own policies from what was inherited.

Our first chart shows the changes in unemployment rate over the past ten years:

te1What is most striking about this picture is the continuity:  the trend line is almost straight extending through the present.  That isn’t surprising.  Changes in employment don’t happen overnight, and after the election there were no substantive changes in economic policy until the new tax plan was passed in December of 2017. (Reduced regulation at the EPA was never a factor, since—despite the propaganda—environment regulation was positive for jobs.)

Another way of looking at the same trend is with job creation, which we see in the second chart:

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Again what is striking is continuity with the inherited trends.

For 2018, however, we’re no longer in a world where nothing had changed—Congress has just passed a tax plan with monumental business tax cuts sold to the public for effects on employment and wages.  Mitch McConnell was hardly shy in his comments: “Under the policies of this unified Republican government, American workers, families, and business owners are achieving economic growth that is unmatched in recent memory.”

Polifact, however, examined the detailed jobs data—which looks like this:

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Their conclusion was what you can see: “Since 2010 — the year the Great Recession began to wane and the recovery began — every January-to-May period saw an average monthly job gain of between 160,000 and 236,000. The performance for 2018 was slightly higher than the average, but pretty typical.”

For now, we’re not going to pronounce on whether the tax cuts will ultimately prove useful or not.  However what we have seen is that even the monumental tax cuts of December, 2017 were not enough to change the clear, multi-year trend shown by all three figures.  The decline in unemployment is NOT where to look for effects of Trump’s economic policy.

Where should we be looking?

To start with we need to look at indicators that are more immediately sensitive to economic changes than the labor market is.   The obvious one is the stock market.

The following chart shows what has been happening to the Dow.

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Starting with Trump’s election the Dow has been rising in anticipation of some form of tax cuts.  Not only were those promised in the campaign, but they were the explicitly-stated objective of the major Republican donors.  Corporate tax cuts, which eventually formed the biggest single part of the story, influence the market directly by going to the corporate bottom lines.  (The markets correctly assumed that any payout to workers would be negligible.)

The markets continued to rise until Trump’s up and down trade wars entered the picture.  Since then neither the market nor anyone else knows exactly where things are going.   There are actually two negatives.   First is the obvious uncertainty.   Second is the fact that Trump’s specific tariffs don’t instill confidence, because they don’t match the business needs or even promote employment.

The graph above shows the uncertainty, but it should be pointed out that the performance is actually worse than it appears.  The fact is that the single biggest use for the corporate tax cuts of 2017 was stock buybacks, nominally to raise share value for investors.  Despite all that extra money, there is no current evidence of a solid increasing market trend.  Business confidence has been replaced by nervousness.  Even the Koch brothers and the conservatives in Congress are worried about the consequences of the threatened trade wars.

Then there is the matter of the deficit.  With the Trump tax cuts we have undertaken massive deficit-funded stimulation of an economy at essentially full employment.  Many economists at the time noted the risk of a speculative crash with nothing left to fund recovery.  Recent data has underlined that risk.

In April the IMF issued a warning.  They see a buildup of worldwide debt to record levels with the Chinese and the US as primary actors.  This first chart shows the overall numbers; the “emerging economy” portion represents largely Chinese debt.

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The next two charts show the US contribution.  The first shows that the US is an anomaly among developing nations in deciding to run the risk of large deficits in good times.

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The next slide adjusts the width of the vertical bar by the size of the national economy, which makes the impact of the US behavior very clear.

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The overall message here is that the amount of debt makes the world’s economic system increasingly fragile.  Further it should be remembered that in the 2008 crash the US and China were the major players who prevented a depression by stimulus spending.  They will be hard-pressed to do it again.  Just to be clear, this is not an argument about international responsibilities.  It is an argument about the risk to us.

As to what would provoke such a crash, we have an obvious candidate in Trump’s trade wars.  However the risks are not necessarily so exotic.  Business cycles end (ten years is a long time for one), and they end just when things seem to be going so swimmingly that people get giddy—like Mitch McConnell in the quote given earlier or the many critics of Dodd-Frank.  The following chart (which we’ll revisit in a minute for other reasons) shows when the past few recessions occurred.

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On that basis you have to say that 4% unemployment can be dangerous territory (particularly after a multi-year stock market boom).  We are quite literally going in blind with no backup.  And you can be sure that if we have a problem there will be scant sympathy from an administration that hates “losers”.

  1. Trump’s policies and the workforce

The cheers for the Trump economy have been based mostly on the unemployment numbers.  However, the chart just presented shows that is only part of the story.  As is evident from the chart, each of the previous business cycles was accompanied by wage growth in recovery.  But you can see that for the current cycle that wage growth hasn’t occurred.  (From this morning’s NY Times: “The rise in consumer prices over the last year has effectively wiped out any wage increases for nonsupervisory workers.”)

Otherwise stated, the benefits of the recovery have most emphatically NOT trickled down to existing workers.  Even in “Trump country” most people were not unemployed—the problem was replacing good union jobs with Walmart.  That hasn’t gotten better.

The reasons for lack of wage growth have been much studied.  The primary factors are

  • Globalization
  • Rise of Non-Standard Employment
  • Rise of Non-Compete Agreements
  • Automation
  • De-unionization

All of these items reduce the power of workers in dealing with management.  We won’t go through the items in detail (the referenced article does an excellent job), but the bottom line is that the Trump administration is actively engaged in making this problem worse.  The anti-globalization trade wars have been of little value for workers, and on non-compete agreements and de-unionization the administration has aggressively taken the side of management against workers.

Overall the current state of the Trump economy is NOT good for workers.

  1. Lost opportunities

The final topic is what has not been done because of the priorities established by Trump’s economic policies.  The point of departure is the following figure showing a breakdown of the financial impact of the business tax plan.

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The most obvious element on the chart is the loss of income due to the corporate tax cut, alone estimated to cost $1,349 B over ten years.  Since the decrease is from 35% to 21%, we get a nice round number for the effect—$100 B for each percentage point.  Note that this occurred as business was doing well, the economy was close to full employment, and the actual corporate tax rate (all benefits included) was a competitive 24%, (and real tax reform could have been close to revenue neutral).  Further we now know that the main beneficiaries thus far have been investors seeing results of corporate stock buybacks.

What could that money have bought?

Two obvious target areas are

  • Education, where school financing has never recovered from the 2008 crash, state budget cuts have teachers out on strike, and increased public college costs have led to a generation trapped in debt.
  • Infrastructure, a problem area identified by both candidates for President but unaddressed in the budget, because there was just no money left.

Estimates are available online for many projects in both areas, so with a hypothetical set of projects we can make the answer concrete:

  • The estimated backlog for repairs of existing highways is $430 B.
  • The estimated cost of upgrading US airports over ten years is $48 B.
  • Ten years of K-12 school repair to upgrade fair and poor facilities nationwide is $380 B.
  • Ten years’ worth of the estimated cost of a federal program to provide free tuition to all the US public colleges and universities is $470 B.

With $1,349 B we could have done all of that.

 

We can now summarize the state of the Trump economy.

  1. The declines in unemployment associated with recovery from the 2008 crash have continued in the same way through the Trump Presidency. No policy act of the Trump administration, including even the 2017 tax cuts, has produced a significant impact on that trend.
  2. Trump’s own policies have been disruptive. His repeated and ever-changing threats of trade wars have unsettled markets and businesses.  Even more importantly he has embarked on massive deficit-based stimulation in good times, contributing to an IMF-identified risk of repeating 2008 or worse.
  3. The decline in unemployment has not produced the usual accompanying increase in wages. Some of the reasons are structural, but the Trump administration has exacerbated this effect by systematically attacking labor’s leverage in dealing with management. Despite the decline in unemployment, the Trump economy has not been good for the existing workforce.
  4. Trump’s tax cuts have essentially stifled any action to address the pressing problems of education and infrastructure in this country. We have become in effect a poorer country.

 

Mid-Term Diplomacy

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Given all the publicity around our trade wars and the North Korean negotiations, it’s worth taking a step back to look at what’s going on.  Let’s check each one.

Why have we started the trade wars?

It’s a good question, since

– The steel and aluminum tariffs have nothing to do with the real issue.

– We gave up half our leverage with China by going it alone, and there have been no significant achievements beyond what China was prepared to do anyway.

Given those facts, there is only one conclusion here—it’s reality TV for the mid-term elections.  “I’ve fought for you like no one else has ever done.”  That way every single news story is a win.  Who cares about the details anyway?

That also fits with Wibur Ross’ explanation to the Europeans of the peculiar idea that the best path to negotiation is to declare war:

“China are paying their tariffs …. China hasn’t used that as an excuse not to negotiate… It’s only the EU that is insisting we can’t negotiate if there are tariffs.”

Otherwise stated:  why can’t you people be like the Chinese?  They let us play boss when we think it looks good.  You people just have to learn.

What’s going on with North Korea?

Trump needs a deal, and he’ll get one on Kim’s terms.   It will be just like all the other agreements with North Korea—phased (and easily reversed) build-down of nuclear weapons in exchange for benefits.  Except this time it will probably include phased withdrawal of US forces from the South—a bigger concession than any other American president has every made.

However, that will be enough for the Trump propaganda machine to get going, and the rest of the press will be so relieved that Trump’s worst impulses were contained that they’ll probably agree.  And so, for public consumption, Trump can be peacemaker for the mid-terms!

 

Back in the real world, though, there are two different questions worth asking:

What do these trade games mean for our future?

If there’s any policy, it’s that we’ve decided it’s no fun winning unless everyone else loses.  So we’re not interested in alliances or trade agreements.  Prosperity is only achieved at others’ expense, so conflict is good—a philosophy that is historically disastrous and particularly inapt today.

Where is the outcry about “national security”?

Our President’s “national security” trade wars are already a constitutional crisis—arbitrary control of trade is NOT an executive power.  And it’s just going to get worse until someone finally does scream.  Trump has been increasingly willing to make up a “national security” excuse for almost anything he wants to do.  Unless the Supreme Court (or public outcry) stops him, there is no limit to where that leads.

 

Trump’s Fabulous Foreign Policy Triumphs

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Trump’s foreign policy has been a media success. David Brooks has decreed that Trump’s “Lizard Wisdom” is far superior to liberal elitism.  Others have called attention to Trump’s fiendishly-clever strategy of brutal attack followed by pull-back to less crazy positions.  That approach hasn’t done much for the real world, but it sure has worked with the press.

With North Korea the press turned from hysteria at the “rocket man” rhetoric to admiration when Trump decided to cool it by accepting Kim’s meeting proposal.  All that  happened, though, is that Kim received a gift that North Korean leaders have wanted for years—certified international status—with no preconditions, which is to say with no commitment to do anything at all.

Kim is running this show for his own benefit.  Whether there will be advantages or disadvantages to the US remains to be seen, but Chinese president Xi sure doesn’t look unhappy.  And the presumption of success adds pressure on Trump to get an agreement under whatever assurances Kim will accept.  The only success in this picture is Trump’s convincing the press of an accomplishment.

Next about China.  David Brooks was crowing about a new opening for American cars—ignoring that Xi had already announced an opening for American cars before the trade war.  Trump’s trade war with China seems to be following the pattern of North Korea:  bluster followed by an agreement that can be trumpeted as “great”.  And the press is likely to fall for it again, overjoyed that the trade war has been replaced by “reason”.

In fact the dual trade wars (China and the EU) have greatly weakened the negotiations with China, and Xi can be quite happy with the cards Trump has dealt.  The U.S. represents 18% of China’s exports; the EU is almost the same.  Trump took half his leverage off the table with the attack on the EU.  As far as Xi is concerned—only in his dreams!

The third issue is the cancelling of the Iran nuclear deal.  This isn’t a case of bluster and retreat, but it’s another pretty story for public consumption.  Trump, Brooks and others talk about the moral imperative (ignoring the nuclear weapons consequences) of imposing sanctions for Iran’s other transgressions.  However, not only is it clear that the sanctions strengthen the hand of the fanatical clerics, but also by turning on the sanctions we have just played our last card.  We’re simply out of the game in Iran, waiting for rescue by regime change.   It’s interesting that we expect ordinary Iranians to love us and hate the Mullahs, because we choose to starve the poor and bankrupt the middle class.

Iran now has no reason (short of war) to care about US policy,  a position they succinctly expressed with the immediate rocket attack on Israel.  We have taken one more step to complete irrelevancy in the Middle East, this time leading to a possible war and a nuclear Iran.

As Trump has said over and over again:  he can’t lose because he owns the press—he’s just too good as copy.  On foreign policy you can push that one step farther: the copy is all you get.

The Trade Wars Are a War on Trade

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The impending trade war with China has already generated the drumbeat of preparations for a real war:  “cheating”, “usurping”, “impoverishing”, “existential threat”, …  Of course with Trump you never know what’s just posturing, given how quickly the North Korean “rocket man” became “very honorable”. So there’s hope that the Chinese trade war will somehow wind down.

But even if it does, we have to recognize there is now a real, ongoing threat to international prosperity.  Trump is attacking the system of fair trade that underlies the world’s rise in prosperity since the second world war.  His notion of sovereignty means he refuses to acknowledge any limits (international or constitutional) on his ability to use trade as a weapon.  That is new, and if it wins we all lose.

 

We start by quoting a position from the Business Roundtable of corporate CEO’s on the trade negotiations with China.

“During negotiations with China, the Administration’s objective should be to secure lasting economic reforms that will curtail China’s unfair trade practices and allow U.S. businesses to compete on a level playing field. Negotiations that focus on temporarily reducing the trade deficit would make this a wasted effort. Working in coordination with our allies, the U.S. should set deadlines on those economic reforms and outline the consequences China would face if reforms aren’t made. This approach will provide an opportunity for the Chinese to produce results and for the Administration to protect the interests of U.S. businesses and workers effectively.”

The important thing about the quote is that it sees the problems with China within the context of internationally-defined fair trade.  And it emphasizes the importance of working with our allies to make the system successful.   That’s as opposed to “reducing the trade deficit”—which seems to be at the top of the administration’s list both for China and for Mexico, Canada, and others.  (This is despite the fact that our balance of payments deficit with China has decreased greatly from peak, is not a financial problem, and is not the reason for the stresses on the American middle class.)

It is important to recognize that regulating deficits is worse than “wasted effort”; it actually subverts the real objectives of fair trade.  Not only does it make China responsible for something it doesn’t completely control (we’re the ones pumping up the federal deficit), it is a rule we would never accept for ourselves.  The whole idea of fair trade is that it should be a system of known rules by which everyone can play; here we’re just imposing whatever we think we can get away with.

The quote is of course coming from businessmen, but the issue is one for everyone.  The downsides of international trade exist, but most cases the problems are of our own doing.  Further the most effective way to impose standards for labor and environmental issues is to work through the definition of fair trade.

We have already sinned against WTO fair trade once, by invoking “national security” as a blanket excuse for unilateral tariffs.   We are going beyond that here by setting rules for others we have no intention ever to obey.

 

The second example is the administration’s other major issue in the Chinese negotiations: “Made in China 2025”.

For high-tech, China today is primarily building products for western companies.  Generally most of the intellectual content and profit goes to the parent company (e.g. Apple) as the top of the heap.  Unsurprisingly, China would like to move up the value chain to get more of the benefit.  Also, China today sources most of the IC chips in the products it builds from other countries—a fact that China views as a risk to its success.  Made in China is the plan to move up.

Made in China 2025 covers just about any technical field you can think of (except AI, with its own plan), and the government expects to spend money to make progress happen.  As an idea, this isn’t terribly different from what is going on in many other countries (see here for a summary of national spending on AI).  But the Trump administration has decided that the whole idea of Chinese government involvement in technological advancement is suspect.

While Mnuchin and others use the language of fair trade to attack the Chinese plan, those attacks have lacked much specificity.  And in fact if the administration is worried about abuse, they could take the whole affair to the WTO.  What makes the case even weirder is that, as we know, the Trump administration has proposed severe cuts in US government funding for research in essentially all fields, claiming the private sector does it better.

So one has to conclude that what is going on is trade warfare pure and simple.  The Trump people (with their zero-sum view of the world) are afraid the Chinese might catch up, and their goals is to throw as many nails on the road as possible to slow them down.  That’s what passes for economic policy.

This is arrogant foolhardiness of the sort the world hasn’t seen since the geniuses of the Iraq war.  As many have pointed out, the companies most hurt will be American.  And the message for the rest of the world is clear.  The US, with quite a lot to gain, has decided it doesn’t need free trade.

The end here, as in our last piece on trade, is constitutional.  It becomes more urgent each time.

Normally, without the seldom-used national security ploy, tariffs are a matter for Congress.  When Trump got away with it on the aluminum and steel tariffs it was a scary first step.  We’re now fighting a whole trade war with China, and no one is questioning that it can be done purely by fiat.

So we no longer need to argue about whether Trump will or won’t try to make himself a dictator.  Unless something happens, he is already in position to wreck our economy all by himself.

Tesla and Ice

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This is a short note on a couple of issues related only in that they say something relevant about the future we should be planning for.

The first relates to Tesla and its production difficulties with the new, lower-priced model 3.  The highly-automated production of the model 3 is well-behind schedule, to the point where it is a big hit to the cash flow of the company.  We mention it here, though, because the delay is an indication that mass production of electric cars is something fundamentally new.

An electric car is a much simpler machine than an ordinary, gas-powered vehicle.  In principle the construction should be both cheaper and easier to automate.  Current production of Teslas is intrinsically a low-volume operation.  The model 3 will be the first indication of what newly-imagined electric car production is like.

I don’t know if we’re in for a shock or not (this is after all a first go at it), but this could be another big change to conventional middle-class employment.  And there will be follow-on effects for gas stations, and especially maintenance and repair.  This is another of many indications that broad, technology-based disruption of jobs is going to happen.

 

The other story is about the commissioning of a new class of Russian icebreaker—targeted at clearing northern ship lanes freed up by the retreat of polar ice with global warming.  The phenomenon is already clear, although the amount of traffic is still small.  The Russians are preparing for the opportunity with multiple classes of new machines planned for release up to 2025.  The Chinese have announced cooperation with the objective of reducing shipping times to Europe by a third.

The US is of course uninterested in consequences of climate change.  The only Coast Guard ice breaker is 40 years old, and they have a hard time getting authorization to get a new one.  The Bering strait, however, could be a shipping lane.

This is a very small example, but climate change affects many things, and as a country we’re trying to avoid finding out about them.

 

The current federal budget is put together for a world where the private sector will take care of everything.  That has always been a fantasy—the efficiency of the private sector comes in large part from its ability to ignore everything not relevant to immediate financial success.  It is particularly false for a world undergoing fundamental change.  We either recognize it and help people through it, or we fall behind and revert to the nightmares of the nineteenth century.

Update on Climate Change

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This note is an update to the climate change article from last year.  The story hasn’t gotten any better, but there is enough that’s new to warrant a revisit.

The most fundamental piece of bad news is the opening figure, which comes from the Global Carbon Project.  After three years of seeming stability, the world production of carbon dioxide increased significantly in 2017.  (The figure says “projection” just to indicate that the final computations are in process.)  Without too much evidence we might as well call that the Trump bump.  As we noted last time, worldwide unanimity on climate change is important precisely because the advantages of cheating are so obvious.  We—with probably the most to gain from the Paris Agreement process—are the cheaters in chief.  So it’s not surprising others will have fewer second thoughts as well.

We have to put this change into perspective.  Even a stable value of CO2 emission means things are getting worse, because it is the total amount of CO2 in the atmosphere that drives temperature change, and it all adds up.  The stable value was attractive, because it seemed to indicate that CO2 had finally peaked and might start to decline.  And the decline might mean the total CO2 could be bounded.  We’re now back to worrying about the peak, with no idea how bad things will get.

Two more new slides from the Global Carbon Project show what we stand to gain from Paris Agreement unanimity.  The first shows the current per capita production of carbon dioxide.

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As has been true for many years US per capita usage sits way above everyone else, more than twice both Europe and China.  That is a direct expression of our carbon-powered standard of living.

The second slide shows who is going to have to make changes to protect that US standard of living from the effects of climate change.

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This shows that the major growth in carbon dioxide production is not from the biggest economies (note that even China has stabilized), it’s from the have-nots trying to achieve some fraction of our standard of living.   We are asking them to ignore not only our past exploitation of fossil fuel resources but even our current high per capita use and to delay their own immediate hopes for a better life in order to make the world a safer place for everyone.  So much for the question of who benefits from the Paris Agreement process!

That introduces the next topic—public attitudes to climate change.  There were enough strange weather events in the past year to give people pause, so we’re getting close to—but still not over—the hump.  The latest poll numbers have both good news and bad.  First the good news:

Overall, 45 percent of those surveyed said global warming would pose a serious threat in their lifetimes, the highest overall percentage recorded since Gallup first asked the question in 1997. Despite partisan divisions, majorities of Americans as a whole continue to believe by wide margins that most scientists think global warming is taking place, that it is caused by human activities and that its effects have begun.

Then the bad—the improvement is only partisan:

Gallup asked whether people agreed that most scientists believe global warming is occurring, and 42 percent of Republicans said yes, down from 53 percent a year earlier and back to a level last seen in 2014. Just 35 percent of Republicans said that they believe global warming is caused by human activities, down from 40 percent.

This seems like another proof of a much-discussed feature of human nature—when people are confronted with proof that their beliefs are wrong, they double down on defending those beliefs.   Unfortunately those are the people running the show.

How can turn that around?  A recent Steven Pinker book made an interesting point.  Much of the rhetoric around climate change focusses on conservation and a new world view of collective responsibility.  But conservation actually isn’t the main point—since we’re not repealing the industrial revolution, the main point has to be new energy sources.  We’re not creating a new world where no one drives Chevy Suburbans anymore, we’re just changing the power source.  Conservation, however important, is about buying time until we can get there.  Perhaps that’s one way to get climate change out of the culture wars (as it should be).

In any case the focus has to be on the reality of climate change, and everything else is tactics. With tactics it’s easier to be bipartisan.   One indication is that Congress, over Trump’s objection, passed a bill continuing tax breaks for solar, nuclear, geothermal, and carbon-capture projects.  This effort united left-wing and right-wing approaches to climate change largely under the radar.  However, it must be recognized that even with such efforts the US is now lagging far behind in support for the technology of climate change.

Carbon capture (separating out CO2 and storing it underground or elsewhere) deserves some special mention, because it has become a bigger topic in the past year.  On one hand this is an idea that has been around for decades without going very far, and what’s more the coal industry supports it as a lifeline.  On the other hand the technology seems to be improving, the Obama administration supported it as a transitional technology, and even the IPCC climate studies assume some form of it will be used.  It currently exists as an expensive add-on for power plants, and some still-speculative variants have been proposed to pull carbon dioxide straight out of the air.  Both the power plant and out-of-the-air applications have a common need for CO2 storage technology, of which there are many variants.

The biggest issue with carbon capture is that it can be (and is being) used to delay doing anything about climate change—why worry about carbon getting into the atmosphere if we’ll pull it all out later.  The problem is that the technology still has such big questions about cost and scaling, that “later” could be very late or never (and some effects, such as melting glaciers, are irreversible).  What you have to say is that the technology investment is necessary and at worst it at least gets the climate dialog past the hoax stage.  And if we could just get the Kochs interested in that business (which is largely oil industry technology), it would settle the Republican perception of climate change once and for all!

Returning to reality, we have to conclude the past year seems like a pause for progress.  After Trump took the US out of the Paris Agreement, many wanted to talk about all that could be done to maintain momentum nonetheless.  The chart at the beginning shows the limits of that point of view.  There are other indicators as well:

– The auto industry’s step back from future fuel efficiency standards

Exxon’s declaration that climate change is no risk to their profits

– Business as usual in the International Energy Agency’s World Energy Outlook:

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– Even the new preoccupation with carbon capture has to be viewed as a vote of no-confidence in the progress of conservation.   If prevention isn’t going to happen, then repair is all we’ve got.

What’s more than there has even been a preoccupation with a more drastic step, so-called geo-engineering.  This means injecting chemicals or particles into the atmosphere so as to dim the sun and cool the earth despite the increasing CO2 concentration.  There are many risks:  continuing ocean acidification, reduced photosynthesis and food supply, and weaponization of the technology.  Since CO2 would continue to accumulate, any loss of protection would have disastrous effects.  These are desperate measures.

As to what we should be doing, the picture is not too different from last year, but we can be perhaps more explicit.

  1. Because burning carbon is now recognized to have definite costs (i.e. whatever is necessary to counteract the CO2 increase), we need some kind of carbon tax so that the free market economy can react correctly. Since that cost is not currently captured, our economy is incurring a significant distortion that needs to be fixed.
  2. We need to get back into the Paris Agreement process to return focus to the goal. To repeat the obvious, the Paris process was always intended to be iterative—with countries readjusting their goals to eventually reach the target. We’re only at step one, so we had better help the world get back on-track.
  3. We have to recognize that at this stage we’re in no position to judge winners and losers among contributing technologies. So the solution has to be all of the above: nuclear, solar, wind, geothermal, batteries, carbon capture, even substituting gas for coal as a temporary measure.  The IPCC gave us what they called a carbon dioxide budget—the amount of CO2 we can add and still stay below a global temperature rise of 2 ⁰ C.  In 2014 (the year of the report) it was 800 giga-tons.  It is now below 700.
  4. People have to recognize that despite confusing news reports, we are all in this together. Some people will be hit by sea-level rise, some by drought, some by sheer temperature, some by storms, some by an effect we haven’t seen yet. Some may even be a little later.  But ultimately there’s nowhere to hide, and even “later” comes fast.
  5. There is no excuse for not funding research in all the contributing technologies and also research to understand the climate effects we are going to live with for however many years it takes to get past fossil fuels.
  6. Ideally all elements of society should be involved in planning such major changes. The carbon tax will help make that happen, but it’s not the whole story. We can’t keep fighting about this.

This administration likes to talk about itself as bringing business practices to government.   The evidence for climate change is such that any reasonable business would be doing its best to quantify the risk, so as to take appropriate action.   Businesses that choose to ignore disruptive new technologies or entrants are the ones that disappear—along with their disparaging comments on how the new stuff will never amount to anything.  Unless we choose to wake up—that’s us.

It’s time to be real.

 

Yet Another Gift to China

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The first point to make is that the current hysteria about a trade war with China is parallel to what happened a few months ago with North Korea.  Then we had weeks of unhinged bluster that kept the press busy around the clock.  Finally it dissipated without a trace when Trump gave in to Kim’s request for a meeting—ignoring all of his and other Presidents’ demands for preconditions.

Trump had his weeks of media-certified toughness and was on to the next photo op.

(It’s not clear what will come out of the meeting, but if the South Korean trade deal is any model—it takes very little to put on a media show of triumph.  Also, it’s hard not to wonder what would happen if the two Koreas got together and decided to keep the nukes.  After all, Trump campaigned on a platform of forcing allies to take full responsibility for their own defense!)

A trade war with China is a God-given opportunity.   The Chinese have already announced as yet unspecified trade openings for the West.  So the punch line is already there—all that’s necessary is the prelude.  We’re currently getting our full-scale dose of Trump toughness on trade.  Every time the stock market goes up or down it’s just that much more publicity.  And the conclusion will be a triumphant proof of Trump’s populism for the mid-term elections.  But since Trump needs a deal, that means—as with Kim—that the Chinese are running the show.

As we’ve noted here before, this is a critical time for negotiation with China.   The West needs to be united in setting the stage for what could be a major period of international growth.  By definition this needs to be done within the framework of the WTO.  Instead of that, however, we have Trump claiming a “national security” exemption for every act of his trade war—thereby undermining the whole notion of WTO-based standards for trade.

There’s just nothing that won’t be sacrificed to a photo op.

The Great Trump Korean Trade Deal

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As usual we need to put two and two together for these announcements.

  1. The biggest, highest profile provision of the deal is the raised limit on the number of cars each American manufacturer can sell in Korea. However, no American manufacturer has come close to the current limit.
  2. American auto manufacturers have recently made clear how interested they are in foreign markets. The industry’s lobbying group—the  Alliance of Automobile Manufacturers—recently released a report full of fabricated challenges to the idea of climate change in support of a regulatory request for relief from new auto emissions and fuel economy standards.

In other words they’d rather come up with the next SUV—a product niche initially unique to the US—than fight it out in the more competitive international market where such standards hold sway.  (Even the Korean deal actually had to include an exemption from such rules, or we couldn’t sell anything!)

So we have theater instead of economic policy.  Too bad we can’t just export media events.